Legislature(2023 - 2024)BELTZ 105 (TSBldg)

03/29/2023 01:30 PM Senate LABOR & COMMERCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= SB 83 PROFESSIONAL LICENSING; TEMP PERMITS TELECONFERENCED
Heard & Held
-- Public Testimony <Time Limit May Be Set> --
+ Bills Previously Heard/Scheduled: TELECONFERENCED
+= SB 93 FISHERMEN'S FUND: VESSEL OWNER CLAIMS TELECONFERENCED
Moved CSSB 93(L&C) Out of Committee
+= SB 88 RETIREMENT SYSTEMS; DEFINED BENEFIT OPT. TELECONFERENCED
Heard & Held
-- Public Testimony <Time Limit May Be Set> --
**Streamed live on AKL.tv**
         SB 88-RETIREMENT SYSTEMS; DEFINED BENEFIT OPT.                                                                     
                                                                                                                                
1:53:59 PM                                                                                                                    
CHAIR  BJORKMAN   reconvened  the   meeting  and   announced  the                                                               
consideration  of SENATE  BILL NO.  88  "An Act  relating to  the                                                               
Public Employees'  Retirement System of Alaska  and the teachers'                                                               
retirement system; providing certain  employees an opportunity to                                                               
choose  between  the  defined benefit  and  defined  contribution                                                               
plans of  the Public Employees'  Retirement System of  Alaska and                                                               
the teachers'  retirement system; and providing  for an effective                                                               
date."                                                                                                                          
                                                                                                                                
Chair  Bjorkman noted  that this  is  the sixth  hearing of  this                                                               
bill. He advised that testifiers  may submit written testimony to                                                               
slac@akleg.gov.                                                                                                                 
                                                                                                                                
1:54:50 PM                                                                                                                    
CHAIR BJORKMAN opened public testimony on SB 88.                                                                                
                                                                                                                                
1:55:46 PM                                                                                                                    
TODD   BURNINGHAM,  representing   self,  Eagle   River,  Alaska,                                                               
testified in support of SB 88.  He described his career in public                                                               
service, from  the US Marine  Corps to public education.  He said                                                               
he was  unaware that moving  to Alaska mid-career  would diminish                                                               
his  previous  foundation  in  building  safety  for  retirement.                                                               
Alaska will not  have a competitive offering  to recruit teachers                                                               
without SB  88. The  Anchorage School  District currently  has 17                                                               
special  education   teacher  openings,  43   elementary  teacher                                                               
openings,  40 secondary  teacher  openings, 142  paraprofessional                                                               
openings,  and many  openings  for administrators.  Understaffing                                                               
hurts  students of  all abilities  and their  ability to  succeed                                                               
faces unneeded barriers.                                                                                                        
                                                                                                                                
1:58:05 PM                                                                                                                    
BARBARA   TYNDALL,  representing   self,   North  Pole,   Alaska,                                                               
testified in opposition to SB 88.  She said that people are weary                                                               
of  past  government spending  because  right  now the  state  of                                                               
Alaska owes $7.4  billion due to a  previous, unfeasible, defined                                                               
benefit  system. She  said it  doesn't  make sense  to drive  the                                                               
state further into debt which is why she opposes SB 88.                                                                         
                                                                                                                                
2:00:18 PM                                                                                                                    
WILL CHERVENAK,  representing self,  Kenai, Alaska,  testified in                                                               
support of  SB 88. He said  his concern stems from  the fact that                                                               
Alaskan teachers  are not eligible  for Social  Security benefits                                                               
and do  not have a  guaranteed pension under the  current system.                                                               
This is the  only state in the  country where this is  true. As a                                                               
school administrator  he has  seen the  effect of  the lack  of a                                                               
defined  benefit  option  for  Alaska   teachers.  He  said  this                                                               
practice has resulted  in ever shallower hiring pools  as well as                                                               
amazing teachers leaving Alaska for  a guaranteed pension. He has                                                               
had  many  conversations  with  colleagues  about  retirement  in                                                               
Alaska  and for  his  TRS  Tier III  cohorts,  retirement is  the                                                               
biggest driving  factor in determining  whether they  will choose                                                               
to stay. He implored the committee to support SB 88.                                                                            
                                                                                                                                
2:02:34 PM                                                                                                                    
JENNA  FABIAN, Principal,  Nikiski North  Star Elementary,  Kenai                                                               
Peninsula  Borough  School   District,  Board  Secretary,  Alaska                                                               
Association  of Elementary  School  Principals, Nikiski,  Alaska,                                                               
testified in support  of SB 88. She said Alaska  currently is one                                                               
of  the few  states that  educators no  longer have  a retirement                                                               
plan and do  not pay into Social Security. Right  now, there is a                                                               
roughly   38   percent   principal   turnover   rate.   Certified                                                               
professionals leave Alaska after a  few years because there is no                                                               
incentive to  stay. The Kenai  Peninsula Borough  School District                                                               
has seen  a direct impact  regarding difficulties  recruiting and                                                               
retaining staff.  The impact of  inflation coupled  with Alaska's                                                               
current  retirement  system  for  educators  has  caused  drastic                                                               
changes to hiring  pools. Five years ago,  vacant positions would                                                               
have  had 10-70  qualified applicants;  now it  is far  less. The                                                               
outcome is even more concerning if  this need is paired with flat                                                               
funding  and the  significant disruption  to  education over  the                                                               
last   several  years.   These  factors   have  compromised   the                                                               
instructional  effectiveness   of  Alaska's   certified  teaching                                                               
professionals. She  said she worries  about teachers  leaving the                                                               
state for  more supportive retirement  systems and  whether there                                                               
will be qualified candidates for those vacancies.                                                                               
                                                                                                                                
2:05:22 PM                                                                                                                    
SAMANTHA   WORTHAM,   representing   self,   Manokotak,   Alaska,                                                               
testified in support of SB 88.  She said she is a science teacher                                                               
in a rural  Native community off the road system.  Her husband is                                                               
in the military so  they have had to move a lot  and she does not                                                               
qualify for  Social Security. At 38  years old she has  chosen to                                                               
live in Alaska, but has to face  the reality that she has no real                                                               
chance of  building a  decent or workable  retirement as  long as                                                               
she  works for  the  state. She  is the  kind  of teacher  Alaska                                                               
needs, but if  she stays she'll be punished  financially and will                                                               
have no  income in later years.  She said she wants  the state to                                                               
make good on its promise to public servants.                                                                                    
                                                                                                                                
2:07:43 PM                                                                                                                    
DAN  POLTA,  Superintendent,   Denali  Borough  School  District,                                                               
Healy, Alaska,  testified in support  of SB 88.  He said he  is a                                                               
TRS  Tier II  employee  who  believes the  current  PERS and  TRS                                                               
programs  must  be  redesigned. State  municipal  employees  also                                                               
participate in  the Supplemental  Benefit System (SBS)  which can                                                               
ameliorate some of  the issues teachers face.  Alaska teachers do                                                               
not participate in Social Security  so PERS and TRS employees who                                                               
move between  the state system  and Social Security  during their                                                               
working  lives  can  be  incredibly  disadvantaged.  At  minimum,                                                               
teachers  deserve  the  assurance  of  a  secure  retirement.  He                                                               
implored  open-minded  discussion  of  SB 88  with  the  goal  of                                                               
providing  public  servants  with   immediate  guarantees  for  a                                                               
financially sound retirement and better working conditions.                                                                     
                                                                                                                                
2:10:18 PM                                                                                                                    
PENNY  VADLA, Member,  Kenai  Peninsula  School Board,  Soldotna,                                                               
Alaska, testified  in support of SB  88. She said her  whole life                                                               
is centered  around teaching,  education, and  children. Children                                                               
should  be  a  number  one  priority.  Alaska  needs  to  provide                                                               
positive  reimbursement  for  teachers,  educators,  and  support                                                               
staff so that  they remain in Alaska. One of  the Kenai Peninsula                                                               
School Board's  priorities is workforce development.  Providing a                                                               
defined benefit  plan will  increase retention;  currently, there                                                               
is little incentive  for teachers to remain in  Alaska long term.                                                               
In  spite of  excellent  training programs,  keeping teachers  is                                                               
difficult because of a lack of a secure retirement program.                                                                     
                                                                                                                                
2:13:03 PM                                                                                                                    
CJ  KOAN,  representing  self,   Wasilla,  Alaska,  testified  in                                                               
opposition  to  SB 88.  She  said  Alaska  owes $6.1  billion  in                                                               
unfunded liability from a previous  defined benefit plan and it's                                                               
a  concern that  this  new  defined benefit  plan  would also  be                                                               
unsustainable. People will not stay  in Alaska if taxes are high.                                                               
She  expressed concern  over  the possibility  of  the PFD  being                                                               
pilfered  to pay  for a  defined benefit  system. She  said there                                                               
should be  some sort of  solution for  the public system  and she                                                               
recommends a defined contribution retirement system.                                                                            
                                                                                                                                
2:15:36 PM                                                                                                                    
CHAIR BJORKMAN  clarified that testifiers are  allowed to testify                                                               
once per bill per committee.                                                                                                    
                                                                                                                                
2:16:05 PM                                                                                                                    
BETH  FREAD, representing  self,  Wasilla,  Alaska, testified  in                                                               
opposition to  SB 88. She  commented that the  state transitioned                                                               
from a  defined benefit  plan because it  was too  expensive, but                                                               
now  it suddenly  isn't. She  expressed  disappointment over  the                                                               
content of SB 88 and the  lack of resourcefulness of Alaskans who                                                               
should reduce  expenditures instead  of leeching more  money from                                                               
the government  through taxes  and taking from  the PFD.  The new                                                               
defined benefit plan proposed in SB  88 will be so expensive that                                                               
the government will  need to borrow from the people.  She said it                                                               
was just a Band-Aid for  retention and implored the committee not                                                               
to  repeat history.  She reiterated  opposition to  SB 88  in its                                                               
current form.                                                                                                                   
                                                                                                                                
2:17:26 PM                                                                                                                    
KIM  HAYS, representing  self,  Anchorage,  Alaska, testified  in                                                               
support of  SB 88. She said  she works in the  private sector and                                                               
has the good fortune of  having a defined benefit retirement. She                                                               
said her parents,  who worked in public service,  are enjoying an                                                               
abundant retirement. Because her  parents have pensions, they are                                                               
able to be highly involved  grandparents resulting in freedom for                                                               
her and her  husband to be more involved in  their community. She                                                               
understands what it means to  have retirement security. She would                                                               
like to have good public  servants but they're leaving because of                                                               
a lack  retirement security and  competitive wages. SB 88  is the                                                               
first step to retaining and honoring public employees.                                                                          
                                                                                                                                
2:19:28 PM                                                                                                                    
BRIAN MASON,  representing self,  Eagle River,  Alaska, testified                                                               
in support  of SB  88. He said  he is a  teacher at  Chugiak High                                                               
School with 17  years of experience in the  district. During this                                                               
time the school  has hired at least 12  younger, less experienced                                                               
people in  the department  and none have  stayed beyond  three to                                                               
five years. In  most cases they left because they  could not make                                                               
a future in Alaska. He said  the department used to have eight to                                                               
a  dozen applicants  per position,  now  there may  only be  two.                                                               
During   a  teacher's   conference,  many   fellow  professionals                                                               
expressed  interest in  moving to  Alaska  but all  of them  lost                                                               
interest when they learned that  there is no defined benefit plan                                                               
or access to Social Security. He reiterated support for SB 88.                                                                  
                                                                                                                                
2:21:55 PM                                                                                                                    
JACOB  BERA, representing  self,  Chugiak,  Alaska, testified  in                                                               
support of  SB 88. He  expressed gratitude for  Senator Giessel's                                                               
quality research in preparing SB 88.  He said he spoke to a group                                                               
of Chugiak Elementary  staff members and learned he  was the only                                                               
TRS Tier II person  in the room; the rest were  all TRS Tier III.                                                               
They said the  outcome of SB 88 would steer  their decision about                                                               
whether  to stay  in Alaska  or not.  He noted  that the  defined                                                               
benefit is  calculated on the  average five years  of consecutive                                                               
service and  this might negatively  impact parents who  choose to                                                               
have a  child and  stay home.  He told a  story relating  to this                                                               
notion.  He suggested  amending  the language  to  omit the  word                                                               
"consecutiveto     avoid  penalizing  new parents  who  may  need                                                               
intermittent years to care for their families.                                                                                  
                                                                                                                                
2:24:38 PM                                                                                                                    
CHAIR BJORKMAN closed public testimony on SB 88.                                                                                
                                                                                                                                
2:24:59 PM                                                                                                                    
SENATOR  CATHY GIESSEL,  District  E,  Alaska State  Legislature,                                                               
Juneau, Alaska, offered closing remarks  as the sponsor of SB 88.                                                               
She emphasized  that the  previous defined  benefit plan  did not                                                               
fail due to  its policy, but because an actuary  made an error in                                                               
its projections and  then lied to the state about  the error. The                                                               
error  and misrepresentation  was  not uncovered  until a  second                                                               
actuary was  hired to audit  the first one. The  previous defined                                                               
benefit  plan had  been  fully funded.  The  new defined  benefit                                                               
system is  modest but provides  the ability for  public employees                                                               
to have dignified  retirements. The new plan shares  the risk and                                                               
shares the cost between employees  and employers with the goal of                                                               
maintaining 90 percent funding of the system.                                                                                   
                                                                                                                                
SENATOR GIESSEL gave a slideshow on  SB 88. She began on slide 2,                                                               
"Alaska  Retirement  Management  Board March  16-17,  2023  Board                                                               
Meeting Div. Of Retirement &  Benefits Supplement to the Treasury                                                               
Reportand spoke to these points:                                                                                                
                                                                                                                                
     •  Over last 7 months,  withdrawals of TRS DC  and PERS                                                                  
        DC are approximately $62 million dollars 90% of these withdrawals came after 5 years, or 100%                                                                  
        vesting On average  $12.4 million/month  is being  withdrawn                                                                  
        from the DC systems Hundreds of  millions  of  dollars are  leaving  the                                                                  
        system and potentially the state each year                                                                            
                                                                                                                                
2:28:44 PM                                                                                                                    
SENATOR  GIESSEL   advanced  to   slide  3,    Alaska  Retirement                                                               
Management  Board (ARMB)  Schedule of  Non-Investment Changes  by                                                               
Fund.   She advised  that  the spreadsheet  shows  data from  the                                                               
Alaska Retirement  Management (ARM) Board meeting.  It shows that                                                               
90  percent  of   the  withdrawals  came  after   five  years  of                                                               
employment.  It begs  the question  of whether  people waited  to                                                               
leave until they could take all of their employer contributions.                                                                
                                                                                                                                
SENATOR GIESSEL advanced to slide  4,  Return to Social Security?                                                               
Legislative Research Report (Jan. 2011).                                                                                        
                                                                                                                                
     • PERS return to Social Security considered Alaska must alter  its "Section 218"  agreement with                                                                  
        the Social Security Administration All employees must be allowed to vote High  complexity  to  replace  Supplemental  Benefit                                                                  
       System (SBS) with equivalent value Social Security                                                                     
                                                                                                                                
2:29:51 PM                                                                                                                    
SENATOR GIESSEL advance  to slide 5,  Return  to Social Security?                                                               
In Summary.                                                                                                                     
                                                                                                                                
     •  Even with  actuarial  assessment  of equivalency  it                                                                  
      would likely be left to courts to determine amounts The consistent message is  extending Social Security                                                                  
        to current non-covered employees raises overall cost                                                                  
        of retirement plans substantially                                                                                     
                                                                                                                                
2:30:10 PM                                                                                                                    
SENATOR  GIESSEL  advanced  to  slide  6,   Supplemental  Benefit                                                               
System (SBS), aka Alaska Supplemental Annuity Plan.                                                                             
                                                                                                                                
     • Created by the State to replace Social Security Most School  Districts  and  Municipalities did  not                                                                  
        join SBS Therefore, large  number  of  Public  Employees  are                                                                  
        without either SS or SBS                                                                                              
                                                                                                                                
SENATOR GIESSEL advanced to slide 7,        Supplemental Benefit                                                                
System (SBS) aka Alaska Supplemental Annuity Plan.                                                                              
                                                                                                                                
     •  Defined Contribution  plan  is  governed by  Section                                                                  
        401(a) of the Internal Revenue Code A portion  of  the  employee  wages  (6.13%)  and  a                                                                  
        matching employer contribution are made pre-tax to                                                                    
        this Plan, instead of contributions to Social                                                                         
        Security Employees  of   the   State   of   Alaska   and   23                                                                  
        municipalities have elected to be in the plan Although  the  SBS  is  a   supplemental  plan,  all                                                                  
        eligible employees are automatically enrolled in the                                                                  
        SBS plan on the date of their hiring                                                                                  
                                                                                                                                
2:31:04 PM                                                                                                                    
SENATOR GIESSEL advanced to slide 8,        Health Reimbursement                                                                
Arrangement (HRA).                                                                                                              
                                                                                                                                
     •  A HRA must be  funded solely by an  employer per IRS                                                                  
        (969) Not  paid   through   voluntary   salary   reduction                                                                  
        agreement on the part of employee Employee pays no  federal taxes or  employment taxes                                                                  
        on money put in HRA by employer Used tax  free for  qualified medical  expenses, not                                                                  
        included in employee's income Unused amounts can be carried forward for years                                                                        
                                                                                                                                
2:32:15 PM                                                                                                                    
SENATOR GIESSEL advanced to slide 9, Other Questions.                                                                           
                                                                                                                                
     • Members in both PERS & TRS Combine PERS from one state with Alaska's Retire before 65  insurance coverage Combine past Pension & Health to level them                                                                            
                                                                                                                                
2:37:09 PM                                                                                                                    
SENATOR GIESSEL advanced to slide 9, Safeguards in Place.                                                                       
                                                                                                                                
     • Protect against downside risk Triggers to increase contributions Suspend or decrease benefits if needed Conservative rate of return                                                                                            
                                                                                                                                
2:38:04 PM                                                                                                                    
SENATOR GIESSEL  advanced to slide  10,  Cost Savings.   She said                                                               
that  the last  92 foster  care workers  left public  service. It                                                               
will cost  $5 million  to hire  and onboard  replacement workers.                                                               
Attorney salaries were raised 20  percent in an attempt to retain                                                               
the  workforce. She  urged the  need to  stop the  loss of  these                                                               
critical employees.                                                                                                             
                                                                                                                                
     • Retain employees Save recruitment costs  lost revenue Save onboarding costs  lost revenue Retain experience & knowledge                                                                                          
                                                                                                                                
2:40:36 PM                                                                                                                    
SENATOR GIESSEL advanced  to slide 12, "SB 88,  Summary on Senate                                                               
Bill 88.                                                                                                                        
                                                                                                                                
     CHALLENGE           CAUSE               SOLUTION                                                                         
     Alaska's            Alaska withdrew     A retirement                                                                     
     Recruitment         from DB retirement w/reasonable                                                                      
     And Retention       system in 2005      costs and fair                                                                   
     Crisis                                  benefits                                                                         
                                                                                                                              
                            SUMMARY                                                                                           
        Alaska has a strong interest in ensuring quality                                                                      
      public servants fill the ranks of our public service                                                                    
                            agencies                                                                                          
                                                                                                                                
CHAIR BJORKMAN held SB 88 in committee.                                                                                         

Document Name Date/Time Subjects
SB 88 Public Testimony-Received 03.18-27.23.pdf SL&C 3/29/2023 1:30:00 PM
SB 88
SB 88 Letters of Support-Received as of 3.21-28.23.pdf SL&C 3/29/2023 1:30:00 PM
SB 88
SB 83 Public Testimony-Received 03.06-03.27.pdf SL&C 3/29/2023 1:30:00 PM
SB 83
SB 93 Draft Proposed CS(L&C) Ver S.pdf SL&C 3/29/2023 1:30:00 PM
SB 93
SB 93 Public Testimony-Letter_UFA 03.27.23.pdf SL&C 3/29/2023 1:30:00 PM
SB 93
SB 88 Public Testimony-Received 03.23-28.23.pdf SL&C 3/29/2023 1:30:00 PM
SB 88
SB 88 Presentation to SL&C 03.29.23.pdf SL&C 3/29/2023 1:30:00 PM
SB 88